2010 (3) TMI 936 - AT - Income Tax

Appeal granted for 12AA registration based on genuine charitable activities. Surplus doesn't negate educational purpose.

The Tribunal allowed the appeal of the assessee, directing the Commissioner of Income-tax to grant registration under section 12AA of the Income-tax Act, ... - Issues Involved:1. Rejection of application for registration u/s 12AA of the Income-tax Act, 1961.2. Legality of trustee appointment and codicil.3. Profit motive and charitable nature of the trust.4. Procedural and technical errors in the rejection of registration.Summary:1. Rejection of application for registration u/s 12AA of the Income-tax Act, 1961:The assessee-trust challenged the rejection of its application in Form No. 10 dated January 22, 2009, for registration u/s 12AA of the Income-tax Act, 1961. The Commissioner of Income-tax rejected the application, concluding that the trust was run on commercial lines with a view to earning profit.2. Legality of trustee appointment and codicil:The Commissioner of Income-tax did not consider the appointment of a new trustee and the codicil dated February 25, 2005, as legal documents, citing clauses 6, 7, 8, 9, and 10 of the trust deed. However, the Tribunal found that the change or replacement of the trustee after the death of one of the trustees and the issue of the codicil were not relevant for the purpose of registration.3. Profit motive and charitable nature of the trust:The Commissioner of Income-tax noted that the trust had been making systematic profits year after year, which led to the rejection of the registration application. The Tribunal, however, referred to various judgments, including the Punjab and Haryana High Court's decision in Pinegrove International Charitable Trust v. UOI [2010] 327 ITR 73 (P&H), which held that merely having surpluses does not lead to the conclusion that an educational institution is existing for making profits. The Tribunal concluded that the accumulation of surplus does not imply that the trust is not solely for educational purposes.4. Procedural and technical errors in the rejection of registration:The Tribunal found that the reasons given by the Commissioner of Income-tax for refusing registration were not legally correct. The Commissioner had not disputed the charitable nature of the trust's objects or the genuineness of its activities. The Tribunal directed the Commissioner of Income-tax to grant registration to the assessee-trust u/s 12AA of the Act, as it fulfilled all the requisite conditions.Conclusion:The Tribunal allowed the appeal of the assessee, directing the Commissioner of Income-tax to grant registration u/s 12AA of the Income-tax Act, 1961. The order was pronounced in the open court on March 19, 2010.